The SAVE Plan
Starting August 1, 2025, interest will resume for borrowers under the SAVE plan. This income-driven repayment plan, was introduced by the Biden administration, allowed borrowers to make payments based on their income and family size.
However, due to a federal court injunction blocking key provisions, particularly forgiving loans, borrowers have had their loans in forbearance since last summer. The court also invalidated the plan’s 0% interest accrual, prompting the Trump administration to reinstate interest charges.
This change will impact approximately 7.84 million borrowers, who can expect to pay an average of $3,500 more in interest a year.
Switching Plans
The Trump Administration recommends that borrowers under the SAVE plan switch to another income-driven repayment plan. However, this process has been backlogged with the Department of Education stating that 1.5 million applications for income-driven repayment plans had still yet to be processed. To combat this, the agency said in July that any borrowers who have previously applied for income-driven repayment and selected the Income-Based Repayment, Pay as You Earn, or Income-Contingent Repayment plans will not have to submit a new application. Meaning that the option to switch plans may take a while.
Options
As mentioned, borrowers are being urged to switch to a different, legally compliant income-driven repayment plan, such as the traditional Income-Based Repayment (IBR) plan. This plan is protected by Congress.
Next is, Pay As You Earn (PAYE) or Revised PAYE (REPAYE). However, these may be phased out or consolidated, depending on further regulatory changes.